Earlier this week, the New York Times detailed how student loan companies are “using sit-downs with lawmakers, town-hall-style meetings and petition drives” as part of a multi-million lobbying campaign aimed at torpedoing the Student Aid and Fiscal Responsibility Act (SAFRA), which would cut the companies’ federal subsidies. SAFRA, which is an Obama administration priority, has bogged down in the Senate due to the loan companies’ efforts, particularly that of Sallie Mae, which last year spent $8 million lobbying.

So yesterday, Education Secretary Arne Duncan fired back:

“Working Americans pay while bankers get rich,” Duncan said in a prepared statement. “Sallie Mae executives have paid themselves hundreds of millions of dollars in the last decade while teachers, nurses, and scientists — the backbone of the new economy — face crushing debt because of runaway college tuition costs.”

“I think banks have had a sweet deal. They’re a powerful lobbying force, and working-class families don’t have lobbyists working for them,” said Duncan in an interview with the Huffington Post. “And so you have strong, entrenched interests that have lobbied and continue to lobby to this day, and they’re running ads in states. And you have, on the flip side, millions of working-class families trying to do the right thing and go to school.”

It’s nice to see Duncan inject some fire into the student loan reform debate, because adopting SAFRA makes complete sense in an era of rising tuition, record student debt, and long-term national deficits. The measure would save more than $80 billion over ten years, which the administration plans to redirect toward Pell Grants and other education initiatives.

SAFRA opponents are making two arguments against reform. The first is that the measure constitutes a “government takeover” of student lending, which is pretty silly considering that federal subsidies already keep the lenders afloat and the government guarantees them against losses.

The second argument is that the move will cause student loan companies to slash jobs, putting people out of work with the labor market still incredibly weak. But as the Scranton (PA) Times-Tribune noted, this doesn’t hold water:

Sallie Mae and three other lenders already have signed contracts with the government to service loans under the direct loan reform. In order to get that contract, Sallie Mae eliminated 2,000 overseas jobs and returned them to the United States. They are servicing jobs. Under the reforms, the servicing part of the industry will grow.

So as the Washington Monthly’s Daniel Luzer put it, “at least in Sallie Mae’s case, it looks like direct lending might actually bring more jobs to America.”

Rep. George Miller (D-CA) has said “it’s inconceivable to me that the Congress would continue unwarranted subsidies to these lenders,” but many senators are still hesitant to back the effort. Given the lengths that the student loan companies are putting into retaining the status quo, the administration needs to continue lending weight to the cause.

In an interview with Bloomberg BusinessWeek, President Obama, who had been characterizing Wall Street bonuses as “obscene” and the “height of irresponsibility,” took a different tone, lauding Goldman Sachs CEO Lloyd Blankfein and JP Morgan Chase CEO Jamie Dimon as “very savvy businessmen,” and saying that he doesn’t “begrudge” their recent success:

QUESTION: Let’s talk bonuses for a minute: Lloyd Blankfein, $9 million; Jamie Dimon, $17 million. Now, granted, those were in stock and less than what some had expected. But are those numbers okay?

THE PRESIDENT: Well, look, first of all, I know both those guys. They’re very savvy businessmen. And I, like most of the American people, don’t begrudge people success or wealth. That’s part of the free market system. I do think that the compensation packages that we’ve seen over the last decade at least have not matched up always to performance.

“$17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don’t get to the World Series either. So I’m shocked by that as well,” Obama added. He also pushed for some specific reforms to compensation practices, including institutionalizing say-on-pay, where shareholders vote on their company’s pay packages. “I guess the main principle we want to promote is a simple principle of ‘say on pay,’ that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay,” he said.

Of course, one big difference here is that baseball players didn’t contribute to the near collapse of the financial system. And while say on pay is a good idea, and should definitely be implemented, the problem with the latest round of Wall Street bonuses is that they came after banks were able to make sky-high profits courtesy of their access to government support. As Paul Krugman put it, “these bank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state. There’s good reason to feel outraged at the growing appearance that we’re running a system of lemon socialism, in which losses are public but gains are private.”

And compare Obama’s stance to that of former Treasury Secretary and Goldman Sachs CEO Hank Paulson, who is vilified for having been too close to Wall Street during his tenure at Treasury, but who is now criticizing “out of whack” bank pay and calling for restraint on the part of executives:

“Today, restraint is very much in order by the top people,” Paulson, 63, said yesterday…“If you have losses, you are supposed to bear responsibility”…“During benign periods, I think compensation levels on Wall Street are out of whack.”

Obama has been making a lot of right moves with regard to the banks recently — like pushing for a bank tax and proposing the “Volcker rule” to break proprietary trading away from commercial banking — but there’s no reason to act as if the banks are seeing booming profits due solely to the business acumen of their CEOs.

Senate Majority Leader Harry Reid (D-NV) had hoped to bring a jobs bill to the Senate floor this week, but the snowfall that is still hammering DC has led to the cancellation of all congressional action for the moment. In the meantime, Reid is wrangling to pick up some Republican votes for the legislation, which the GOP is hinging on the inclusion of tax provisions, a promise on Reid’s part to address the estate tax in a timely fashion, and the exclusion of some spending initiatives.

But now some on the Democratic side are questioning the basic contours of the jobs bill, which according to a draft version that’s been circulating, is composed mainly of tax breaks to incentivize hiring and extensions of social safety net provisions (like unemployment benefits). House Speaker Nancy Pelosi (D-CA) is rightly questioning the efficacy of the hiring incentives, as “no one she’s consulted believes that the plan will actually lead to the creation of new jobs.” Sen. Sherrod Brown (D-OH) is also questioning the bill’s “heavy emphasis on tax breaks“:

“Why not think about things like taxing bonuses and send money directly into small-business loans?” Brown said. “Things like that we need to be talking about, not some of the same old, same old.”

Brown’s criticism sounds like that of Rep. George Miller (D-CA), who last week said that the jobs proposals before congress are “not adequate to the scope of the problem.” And notably absent from the Senate bill are aid to states and new infrastructure spending. Both of these measures could help spur additional job growth.

But more importantly, the economy is still suffering from a lack of demand. According to the latest National Federation of Independent Business small business survey, “shortage of customers” is the number one problem impeding small business hiring. And until those businesses feel secure that they will have customers for their products, they aren’t going to hire, no matter the various tax breaks.

Some sort of direct job creation, or using money to help national service organizations hire and increase their services, would put funds directly into the hands of consumers, who can then spend it and increase demand. Investments in clean energy could have the same effect.

Limiting the bill to tax breaks that will sit well with Republicans may be a worthwhile effort if bipartisanship is the ultimate goal. But we need to create 350,000 jobs per month for the next two years just to recover what we have lost since the recession began. Fixing the labor market is going to take a monumental effort, so this is no time to simply tweak at the margins with tax breaks that are questionable at best in terms of boosting employment.